Entrepreneurs have long been a beacon of innovation and economic growth in India. However, a significant portion of them emerge not from opportunity, but necessity. With limited access to stable employment and livelihood options, many individuals, especially in rural and semi-urban areas, turn to entrepreneurship to survive. These entrepreneurs often lack the financial resources and business acumen required to thrive — posing a unique set of challenges and opportunities for growth.

Necessity entrepreneurs: Challenges and opportunities

India’s vast population and socio-economic disparities have created a scenario where formal employment opportunities are insufficient to meet the demands of the labor force. This gap has given rise to a large number of “necessity entrepreneurs”. Necessity entrepreneurs are small-scale entrepreneurs or individuals running nano and microenterprises with minimal capital investment. These ventures can range from small provisions stores, known locally as kirana shops, to home-based businesses like tailoring or small catering services. While these businesses play a crucial role in sustaining livelihoods, they often operate on thin margins and face significant barriers to growth, including:

• Limited access to finance: Traditional banking and financial institutions are often reluctant to extend credit to small-scale entrepreneurs due to perceived risks and lack of collateral.
• Lack of business knowledge: Many nano entrepreneurs start their ventures without formal business training or an understanding of market dynamics, leading to inefficiencies and lost opportunities.
• Minimal use of technology: In the digital age, technology can significantly enhance business operations and outreach. However, many small-scale entrepreneurs lack the digital capability to leverage these tools effectively.

Sangita, a boutique owner in Pune, Maharashtra, experienced these challenges when she opened her shop with her husband. She faced difficulties growing her sales due to lack of formal business training and limited financial resources. To help entrepreneurs like Sangita bolster their skills and increase their competitiveness, Accion partnered with Mahindra Finance to implement the Financial and Digital Literacy Program. The program aimed to equip over 20,000 micro, small, and medium enterprise (MSME) owners — particularly nano and microentrepreneurs — with the skills to thrive in the digital economy. Program participants were located across urban and semi-urban parts of Gurugram, Pune, Bengaluru, Jaipur, and Chennai in India. The initiative sought to bridge the gap between traditional business practices and modern digital commerce for MSMEs by promoting digital transactions and encouraging e-commerce adoption to help foster their sustainable growth.

Building business knowledge and skills

The initiative addressed knowledge and skill gaps in MSME’s financial management, digital payment systems, and e-commerce strategies through training modules customized to their specific needs. Key areas of focus included:

• Financial management: How to manage their finances, maintain accounts, and understand cash flow, which can lead to more sustainable business practices.
• Marketing strategies: Market research, customer segmentation, and effective marketing techniques that would help attract and retain customers.

Introduction to government initiatives: Introduce MSME owners to relevant government schemes such as the Indian government’s Skill India initiative and Aadhar Udyam Registration, which aims to provide skill development training and other benefits to millions of budding entrepreneurs.

Enhancing financial capabilities

We also focused on building financial capabilities as a fundamental component of successful entrepreneurship. For many entrepreneurs, understanding financial products and services can open doors to various funding opportunities and improve their financial decision-making. We developed training to expand their knowledge of:

• Credit products: The different types of credit, interest rates, and repayment mechanisms that can help entrepreneurs secure funding on favorable terms.
• Savings and investments: Savings schemes and investment options that could help them build a financial cushion and reinvest profits for growth.

Insurance products: How insurance products can protect small businesses from unforeseen risks and enhance stability.

Embracing digital payments

In today’s digital era, adopting digital payment systems can significantly enhance the efficiency and reach of small businesses. Along with the business and financial training, we also emphasized the advantages that digital payments offer to small business owners:

• Increased convenience: Cashless transactions are quicker and reduce the need for handling physical cash, which can be cumbersome and risky.
• Broader customer base: Accepting digital payments can attract tech-savvy customers who prefer cashless transactions, which can expand their customer base.
• Improved record-keeping: Digital transactions create an electronic trail, simplifying accounting and financial management.

The Indian government’s push for a “Digital India” and the proliferation of mobile wallets and mobile payment applications such as like Paytm, Google Pay, and UPI (Unified Payments Interface) have created an ecosystem conducive to digital payments. However, ensuring that entrepreneurs can navigate and utilize these platforms effectively requires targeted training and hand-holding support. Through the initiative, women like Sangita not only received comprehensive business and financial training but also grew more comfortable with the idea of using other digital platforms. She plans to use platforms like WhatsApp for sales and customer outreach and explore other modern practices that can help her make her business more profitable.

Championing nano and micro enterprises to drive economic growth

Necessity entrepreneurship in India represents both a challenge and an opportunity. While these entrepreneurs face significant hurdles due to a lack of resources and business knowledge, they also possess immense potential for economic contribution and innovation. By providing adequate business skills training, enhancing their financial capability, and promoting the adoption of digital payments, stakeholders can empower millions of nano and micro enterprise owners across India to not only sustain, but grow and thrive.  This, in turn, can lead to more inclusive economic development, reducing poverty and improving the quality of life for millions across India.

Learn more about how Accion works to help strengthen MSMEs globally through tailored capability building programs and tools.